Time to jump in: 2 ultra-high-yielding dividend stocks with 25 years of dividend increases that are screaming to buy right now

Over the past century, Wall Street has been a virtually unstoppable wealth generator for patient investors. While other asset classes have helped build nominal wealth, such as oil, gold, bonds, and housing, none have come close to the average annual returns over the past 100 years that stocks have delivered.

With thousands of publicly traded companies and publicly traded funds to choose from, there is an investment strategy to suit almost every investor’s goals and risk tolerance. But among these numerous strategies, few can hold a candle to the rich returns that can come from buying and holding high-quality dividend stocks over the long term.

Last year, investment researchers at Hartford Funds published a detailed report (“The Power of Dividends: Past, Present and Future”) that examined the various ways dividend-paying companies outperform non-dividend-paying companies over the long term.

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Data from this recently updated report in partnership with Ned Davis Research shows that companies that pay dividends have more than doubled the average annual returns of public companies that did not pay dividends over the past 50 years (1973-2023) . 9.17% vs 4.27%. Additionally, dividend payers were, on average, 6% less volatile than dividend payers. S&P 500Non-payers were 18%. more volatile.

Perhaps the best thing about investing in dividend stocks is that you can always find value, even if Wall Street’s major stock indexes hit record highs. The real challenge is deciding which dividend stocks to invest in. Because not all dividend payers are created equal.

Companies with the ability to increase their dividends year after year are typically time-tested and able to generate recurring earnings and provide transparent long-term growth prospects. In other words, they are just the type of companies that expect their value to increase over the long term.

Currently, two great ultra-high-yield dividend stocks, or “ultra-high-yield” stocks, have yields more than four times the yield of the S&P 500 and are committed to growing base annual payouts. At least 25 years have been ripe for selection by opportunistic income seekers.

Real Estate Income: 6.04% yield

The best retail real estate investment trusts (REITs) are the first high-octane dividend stocks with consistently increasing base annual payouts that urge you to buy now. real estate income (o -0.25%).

Realty Income has increased its monthly distribution for 107 consecutive quarters. This is dividend data from O YCharts.

In less than two weeks, Realty Income declared its 647th consecutive record. monthly It has paid a dividend and has increased its payout in each of the last 107 quarters (almost 27 years). Based on the newly announced monthly distribution of $0.2625 per share, Realty Income’s forward dividend yield is once again above 6%.

The main reason Realty Income stock has struggled over the past two years is the Federal Reserve’s hawkish monetary policy. The steepest rate hike cycle in 40 years has sent short-term Treasury yields soaring to around 5%. Treasury bonds have been more attractive than high-yield REITs in recent quarters because they offer virtually no risk to investor discipline.

But at some point, a REIT’s value proposition begins to outweigh this risk/reward scenario. I strongly argue that we have reached that point with this leading retail REIT.

Following the completion of its acquisition of Spirit Realty Capital last January, Realty Income closed the first quarter with 15,485 commercial real estate (CRE) properties in its portfolio. It is estimated that approximately 90% of the gross rents collected by these CRE properties are resilient to economic downturns and e-commerce pressures.

secret? Realty Income stands out for selling basic necessities or leasing to independent retailers that provide basic essential services. Grocery stores, convenience stores, dollar stores, home improvement stores, pharmacies and auto service stores account for nearly 42% of annual contracted rents. These are businesses that can generate predictable cash flow in almost any economic climate.

The real benefit of renting to a high-quality independent business in a basic essential industry is that you don’t have to worry about finding new tenants or getting paid. Since the beginning of this century, the median S&P 500 REIT has enjoyed a respectable occupancy rate of 94.2%. Realty Income’s median occupancy rate has been 98.2% for the past 23 years and continues to change. If its tenants generate predictable cash flow and pay their bills, it’s easy to raise the company’s dividend for the 107th consecutive quarter.

In addition to its top-tier retail CRE portfolio, Realty Income has been expanding into new verticals. In the past two years, we have completed two transactions in the gaming industry, acquiring Spirit Realty Capital to diversify our revenue streams and forming a joint venture with Daum. Digital Real Estate Trust We develop custom data centers for lease. yesThis means Realty Income could benefit from the artificial intelligence (AI) revolution in the long term.

Best of all, Realty Income’s stock is cheaper than it has been over the past decade. The 11.6 multiple for Realty Income’s cash flow for the coming years ended May 24 represents a 33% discount compared to its average cash flow multiple over the past five years.

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Enterprise Product Partners: 7.3% yield

The second ultra-high-yield dividend stock to boast 25 consecutive years of dividend increases is the energy juggernaut. Enterprise Product Partner (EPD). Enterprise pays dividends quarterly and has increased its base annual dividend since becoming a public company in July 1998. The forward yield based on current dividends is 7.3%, dwarfing the S&P 500 and has generated a total return of $53.2 billion. to investors, including share buybacks after listing.

To be fair, oil and gas stocks won’t be everyone’s cup of tea. Some investors view the fossil fuel industry as a “sin” industry.

Additionally, the historic decline in demand for crude oil and natural gas during the early stages of lockdowns due to the COVID-19 pandemic four years ago remains fresh in the minds of many investors. Drilling companies were hit hard by a brief plunge in crude oil futures prices. negative $40 per barrel.

Enterprise Products Partners has increased its base distribution every year for the past 25 years. EPD dividend data from YCharts.

But if you can overcome this recency bias and have no qualms about investing in the U.S. fossil fuel industry, Enterprise Products Partners has the tools necessary to make patient, income-seeking individuals richer.

The reason Enterprise has been making such incredible investments for so long is because it’s not a driller. It is an important energy broker for the U.S. fossil fuel industry. It operates over 50,000 miles of transmission pipelines and 26 fractionation facilities and has the capacity to store over 14 billion cubic feet of natural gas and over 300 million barrels of petroleum/refined liquids.

The advantage of being one of North America’s largest midstream operators is the ability to secure long-term, fixed-fee contracts with drilling companies. The majority of the company’s contracts are fixed fee, which removes spot price volatility from the equation. Being able to transparently and accurately forecast cash flow more than a year in advance has given Enterprise Products Partners’ management team the confidence to increase distribution, take on new projects, and make revenue-boosting acquisitions.

In terms of major projects, the company has approved spending of nearly $7 billion. Most of these projects, which are focused on expanding the company’s natural gas liquids (NGL) segment, are expected to come online before the end of 2025. Capital spending is expected to fall by $1 billion (or more) in 2026, and at a much faster pace. Revenue growth.

Meanwhile, a steady stream of additional acquisitions has expanded the scope of Enterprise’s pipeline and boosted its cash flow. Three months ago, Enterprise Products Partners agreed to pay Western Midstream Partners $375 million for the remaining 20% ​​stake in the 620,000-barrel-per-day Whitethorn pipeline and the remaining 25% stake it does not yet own. Two non-owned NGL classifiers. There are many incentives for companies to add pipeline and NGL interests in the future.

Enterprise product partners should also be clear beneficiaries of lower capital spending from energy majors following the worst of the COVID-19 pandemic. Years of reduced spending have limited global oil supplies and helped boost spot prices. Sustained high prices for crude oil encourage more domestic drilling and help companies secure more lucrative contracts.

Enterprise Products Partners looks like a huge bargain, trading at about 7x forward cash flow and just under 10x future earnings.